Processed food to Malaysia

(Last updated: 11 Nov 2008)

Trends and opportunities

The market

In 2008, Malaysia has an overall growth in dried, chilled and frozen processed food. Dried processed food value sales grew by eight per cent to reach RM2.2 billion, chilled processed food value sales grew by four per cent to reach RM 243 million and frozen processed food value grow by five per cent to reach RM463 million.

The Malaysian food processing industry is fragmented and largely dominated by small to medium enterprises, many of which are family-owned. There are a small percentage of large companies such as Yeo Hiap Seng, Nestle and F&N.

Although exports have improved greatly in recent years, Malaysia remains a net importer of processed food. The key problems faced by the industry include shortage of raw materials, lack of technology and limited research and development.

Urbanisation and the concentration of wealth in cities, combined with an increasingly ‘Westernised’ society have changed consumer behaviour and desires. Consumers are now more discreet in their spending and will shop around for ‘bargain’ buys and cheaper alternatives.

The Malaysian packaged food industry has also become increasingly competitive with more manufacturers embarking on aggressive marketing activities from television advertisements to in-store promotions. In addition, the presence of imported products from neighbouring South East Asian countries also improved.

Growing urbanisation has also altered consumers’ taste and lifestyle, which have become more open to new innovative products. This is because urbanites have greater exposure to various types of packaged foods and they are more willing to spend money than the rural populace.

Malaysia’s current population is 26.8 million and comprises of Malays (66.1 per cent), Chinese (25.3 per cent), Indians (7.4 per cent) and others (1.2 per cent). The distinction between these groups needs to be appreciated in order to understand the difference in eating preferences of each group. Generally, Malaysians tend to enjoy sweets and spicy foods. 

Racial composition will also change with the pre-eminence of Malays (who are Muslims) from just over 50 per cent in 1980 to around 66 per cent of the total population. This is important, as food consumed by Muslims has to be halal (permitted under the Islamic Law).

Malaysia also has a relatively young population with 33.1 per cent of the population being under 14 years of age and 42 per cent between 15–39 years old (Third Outline Perspective Plan). This sector of the population will have significant impact upon the market for consumer food products due to changes in perception:

• Pre-prepared convenience meals or frozen food products may not be deemed to be unhealthy as perceived by most of the older generation.
• Changes in taste, eg. having cereal for breakfast in replacement of bread or other traditional cakes.

Fresh produce food is still preferred but purchase of frozen and chilled processed food has increased with economy growth. Increased ownership of microwave ovens and refrigerators has led to an increase in consumption of pre-prepared convenience meals and frozen food products.

Growing affluence and the increase of women in workforce have contributed to the frequency of dining out. Dine-out options available range from cheap roadside food stalls to exclusive restaurants.

The market for most of the processed foods in Malaysia is at the mature phase, making it difficult to achieve high sales growth. In pushing for higher sales growth, companies try to take away competitors’ share and by launching new products.

Opportunities

The key opportunities in the Malaysian processed food industry include:

• Flour based products such as pasta, biscuits, pre-mixes, frozen pastries and chocolate confectionery
• Cereal-based products such as breakfast cereals, muesli and rolled oats
• Pure fruit juices, orange juice concentrates, frozen vegetables, edible nuts and canned fruit
• Condiments, seasoning and sauces
• Nutritional snacks such as fruit rolls and yoghurt bars
• Health foods and bars
• Halal-processed meat such as corned beef

Competitive environment

The 1990s saw the entry of major international retailers and there was tremendous growth in this sector. International retailers such as Carrefour, Dairy Farm International (consists of Cold Storage and Giant outlets) Tesco and Jusco dominate the retail market. Peninsula Malaysia currently has about 400 supermarkets.

Tariffs, regulations and customs

There is no import restriction imposed on processed food products in Malaysia.

The current import duty for major food products are as follows:

• Edible nuts, jam – nil
• Cereal products – 2 or 5 per cent (depending on cocoa coating)
• Extract and essences, dried fruit – 5 per cent
• Canned fruit, fruit juices, biscuits – 6 per cent
• Canned vegetables, noodles – 8 per cent
• Confectionery – 15 per cent
• Sauces, food not elsewhere specified – 20 per cent

Industry standards

All pre-packaged food products on sale in Malaysia are subject to the control of the Food Act 1983 and Food Regulation 1985. The Act and Regulations apply to any locally prepared or imported foodstuff. The main aim of these regulations is to ensure that food on sale in Malaysia is safe for consumption. A selected range of packaged food, both local and exported, must carry nutritional labels under the nutritional labelling regulations. 

The Acts also set product standards including labelling requirements on foods such as processed meat, fish, sauces, beverages and confectionery. Food exported to Malaysia may be labelled in either Malay or English and a separate sticker on the label is to provide the name and address of the importer.

Processed meat products must obtain an import permit approval from the Department of Veterinary Services.

The Royal Customs and Excise Department Malaysia provides further information on import duty and sales tax.

Marketing your products and services

Market entry

The majority of the processed food marketed in Malaysia is handled through local import agents or distributors. Depending on the type of processed food and whether mass consumers or a niche market is targeted, you can consider using a multinational trading house or a medium trading company to undertake marketing and distribution.

International foods consolidators can consider approaching international retail chains to explore the possibility of supplying dried groceries to these outlets.

Exporters of flour-related products (eg. cakes, frozen pizzas or pastries) can consider entering a manufacturing-under-licensing arrangement with local food processors, thus making the product more competitive in the industry.

A number of large food processors with established house brands may import other brands to complement their own range of products for distribution through their established channels. With reverse contract manufacturing, certain products such as canned fruit cocktail, for mass consumer marketing can be manufactured in Australia under local house brands for distribution through normal channels by these food processors.

Malaysians prefer audio-visual methods rather than print mediums, therefore appropriate use of the television media is recommended. The product image should reflect ‘trustworthiness and reliability’, which connotes that the food products are safe to be consumed and are always fresh. With smaller advertising and promotion budgets, suppliers should explore other avenues such as in-store promotions to encourage customers to purchase.

Packaging must be durable and strong to protect against weevil infestation (especially for products such as premixes and dried sultanas) and not prone to rust (for canned fruit, fish and vegetables) due to the high humidity in Malaysia. Smaller packs (instead of family packs) should be used to induce purchase from a wider cross section of the middle class. Catering packs should be recommended to the institutional buyers.

To achieve maximum penetration through the supply chain, products should preferably carry a minimum shelf life of 12 months so as to reduce the level of returnable stocks.

Given the large Muslim population, manufacturers should refrain from the use of any non-halal (not permitted under the Islamic law) food ingredient such as animal fat, as this will automatically eliminate some 66 per cent of the population from consideration as potential consumers.

Distribution channels

The vertical channel for the marketing of imported processed food is normally through agents or importers or distributors and then to wholesalers. Distributors sell mainly to major supermarket chains, hotels and restaurants. Wholesalers cover the smaller retailers, provisional stores and food and beverage outlets.

Transport

Most processed food is imported by sea but urgent consignments are airfreighted. Port Klang, the national port is the main port of entry for processed food. Other ports are at Penang, Kuantan and Pasir Gudang. The main ports in East Malaysia are Kuching and Kota Kinabalu.

Malaysia’s international airport, Kuala Lumpur International Airport is located at Sepang, about 60 kilometres from Kuala Lumpur.

Links and industry contacts

Food–related resources

Malaysian Food and Beverage Executives Association – www.mfbea.com.my
Malaysian Agricultural Research and Development Institute (MARDI) – www.mardi.my 
Department of Veterinary Services Malaysia – http://agrolink.moa.my/jph
Nutrition Society Malaysia (NSM) – www.nutriweb.org.my
Yeo Hiap Seng – www.yeos.com.my

Government, business and trade resources for Malaysia

Royal Customs and Excise Department Malaysia – www.customs.gov.my
The Department of Statistics Malaysia – www.statistics.gov.my
Food Act 1983 – http://fsis.moh.gov.my/fqc/
Food Regulations 1985 – http://fsis.moh.gov.my/fqc/

The Department of Statistics Malaysia – www.statistics.gov.my
Block C6, Pusat Pentadbiran Kerajaan Persekutuan
62502 Putrajaya
Malaysia
Tel: +60 3 8888 5700
Fax: +60 3 8888 9248

Ministry of Health – www.moh.gov.my
Food Quality Control Division
Department of Public Health
4^th Floor, E Block, Office Complex
Jalan Dungun
Damansara Heights
50490 Kuala Lumpur
Malaysia
Tel: +60 3 254 0088
Fax: +60 3 253 7804 

Service providers

World Asia Media Holdings (M) Sdn Bhd
125A Jalan Aminuddin Baki
Taman Tun Dr Ismail
60000 Kuala Lumpur
Tel: +60 3 7728 6883
Fax: +60 3 7728 4883
Email: wam@wamhldgs.com
Publisher of Hospitality and Retail World magazines

Airfreight Forwarders Association of Malaysia (AFAM)
16B, 2^nd Floor, Jalan Kemuja
Bangsar Utama
59000 Kuala Lumpur
Malaysia
Tel: +60 3 2287 2457
Fax: +60 3 2287 2592
Email: afamas@tm.net.my

Public Bonded Warehouse Operators Association, Selangor
70B Lebuh Beringin
42000 Port Klang
Malaysia
Tel: +60 3 3168 7695
Fax: +60 3 3168 1773
Email: mermansr@tm.net.my

Media

Nutrition Ezine – www.nutriweb.org.my
Berita Publishing – www.beritapublishing.com.my
MAH News – www.hotels.org.my